You have to admire Niall Ferguson. There aren't many people who are willing to write lengthy diatribes on topics on which they seem to know next to nothing, but some would say that is the definition of a Harvard professor.

The Niall Ferguson post that Baker addresses is itself a takedown of Paul Krugman's analysis of the UK economic situation leading up to the election.

Ferguson's argument is basically that Krugman is wrong to criticize the UK's austerity policies, since the economy is doing just fine after several years of austerity:

Let us just be clear. Paul Krugman predicted that George Osborne's policies would devastate the UK economy, producing results worse than those of the 1930s. The outcome? More than 1.9 million jobs have been created since May 2010.

Baker says this is wrong:

Anyhow, [Ferguson] apparently believes that the victory of the Conservative Party in the U.K. election last week showed that he was correct to endorse their austerity policy and that Paul Krugman was wrong to criticize it. If he was familiar at all with the literature on the impact of the economy on elections he would know that elections are largely determined by the economy's performance in the last year before an election, not an administration's entire term.

[...]

But the real story is the overall performance of the U.K. economy, which Ferguson somehow thinks was extraordinary. The data beg to differ, even if the U.K. has done better in the last couple of years as the government relaxed its austerity. Here is the per capita GDP record of the G-7 economies since the crisis ... the U.K. ties France for fifth place, only beating out Italy for last place. If we treat 2010 as the start point, it managed to close the gap with France in the next four years (which also was forced to pursue austerity since it was in the euro zone), but fell further behind Germany, Japan, Canada, and the U.S.

The lesson here, of course, is that economists are vicious to each other in print when they disagree.

The vessel for it, in this case, is the economic arguments surrounding the recent British election.

UPDATE: It's been pointed out that I failed to mention that Ferguson also got the basics of the US government's TARP program wrong in his post. Ferguson writes:

Krugman applauded Gordon Brown for injecting capital directly into the British banks rather than relying on purchases of "troubled assets," the initial thrust of the Troubled Asset Relief Program in the United States.

While purchasing troubled assets was what the US planned to do, it eventually went another route. As Baker says, "the small detail that Ferguson apparently missed is that TARP also went the route of giving the banks capital in exchange for share ownership in the form of the purchase of shares of preferred stock."

SECOND UPDATE: In an email to Business Insider, Mr. Ferguson says he is not wrong. He says Baker is, in fact, the one who got it wrong.

THIRD UPDATE: After publishing parts of Mr. Ferguson's email, he emailed again to request we publish the below version of his argument.

From the email:

This is, however, wrong, as anyone who followed those events closely (as I did) knows, or as anyone who reads subsequently published accounts can confirm. As I said, TARP was initially designed to finance the purchase of "troubled assets" from the banks. It later evolved in numerous ways, including the forced purchase of preference shares. But this was in no way the same as the nationalization of banks that Gordon Brown carried out in the UK, notably in the case of RBS, 80% of which is still owned by the UK government. As Tim Geithner noted in his memoir: "Because the initial TARP capital injections were in preferred rather than common stock, the market saw them more as additional medium-term debt for the banks than as permanent loss-absorbing capital." (Stress Test, Kindle Locations 4377-4378). As is well documented (see e.g., http://www.newyorker.com/magazine/2009/10/12/inside-the-crisis), the Obama administration also resisted Krugman's repeated calls for nationalization of the most under-capitalized banks. Those strident calls were even reported in Business Insider (http://www.businessinsider.com/krugman-nationalize-now-before-everything-really-falls-apart-2009-2). Memories are short in financial journalism.

All those preference shares were long ago sold (at a profit). George Osborne must fervently wish the UK had gone down the TARP route.

To some young journalists, no doubt this all seems like ancient history. But I resent being smeared by people too lazy or perhaps too malicious to research a story.

It is worth adding, finally, that the issue of TARP was hardly the core point of my piece, which was that Krugman got the UK completely wrong, repeatedly predicting another great depression if the government attempted to reduce the vast deficit it inherited. Baker's piece in no way refuted that core point, least of all with its laughable little Excel chart, which he had the shamelessness to base in 2007, three years before George Osborne became Chancellor.

** This post originally attributed Ferguson's comments to the Financial Times rather than the Huffington Post. He did, indeed, publish an op-ed in the FT this week on a similar topic, but his comments in the post above come from the HuffPost.

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